Leave New Zealand for more than 184 days and your interest-free student loan stops being interest-free. The moment you become an "overseas-based borrower," Inland Revenue starts charging 5.6% per annum on your entire outstanding balance.
For a $30,000 loan, that is $1,680/year in interest. Money that was not accumulating while you lived in NZ. The policy exists to incentivize graduates to stay (or return) to New Zealand rather than taking their taxpayer-funded education abroad permanently.
The 184-day rule
You become overseas-based when you have been outside NZ for 184 consecutive days. Short return visits under 31 days do not reset the clock. Once classified as overseas-based:
- 5.6% annual interest begins accruing
- Compulsory repayment obligations apply (based on your overseas income)
- You must file an overseas income assessment annually
Rajeev's real-world situation
Rajeev graduated with $45,000 in student loans and moved to Melbourne for work. After 184 days:
- Year 1 interest: $45,000 × 5.6% = $2,520
- Required annual repayment: based on his AU$95,000 salary = ~NZ$3,500/year
- If he pays only the minimum: his balance barely decreases (interest eats most of it)
- To actually clear the loan in 10 years: he needs ~$6,500/year in repayments
The return incentive
Return to NZ for 184+ consecutive days and the interest STOPS immediately. Any interest already charged remains on the balance, but no new interest accrues while you are NZ-based. This creates a strong incentive to return before the loan compounds too far.
